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International Monetary Fund
A study by the author published in 1988 proposed the hypothesis that export instability depends upon the level of industrialization of the exporting country and the position of exports in the product cycle (growth or mature products). This paper provides further empirical evidence in support of the hypothesis. The paper discusses the significance of the empirical findings, explains why diversification has increased export instability in many developing countries, and discusses the policy implications of the findings. The paper also analyzes the effects of data aggregation on empirical results and suggests topics for future research.
International Monetary Fund

I. Introduction A recently published study ( Mullor-Sebastian 1988 ) proposed the hypothesis that export instability is related to the degree of industrial development of the exporting country in a manner consistent with the product cycle theory of comparative advantage, and found empirical support for this hypothesis. The study focused mainly on theoretical aspects of export instability and on related econometric work, and gave little attention, due to space limitations, to several significant empirical findings, to the relevance of the empirical findings

Mr. Atish R. Ghosh and Mr. Jonathan David Ostry
Uncertainty about the export earnings accruing to a country (sometimes referred to as export instability) is an important source of macroeconomic uncertainty in many developing countries. Theory predicts that countries should react to increases in this form of uncertainty by increasing their level of savings. The resulting asset accumulations would then act as the country’s insurance against the greater riskiness in its income stream. The paper tests this implication for a large sample of developing countries. In general, the results suggest that developing countries have indeed respo